Company pension fears calmed

THE Government has moved to calm employers' fears that they will be unfairly punished if they can't fulfil pension requirements.

The Department for Work and Pensions has made several amendments to the 'moral hazard' clauses included in its Pensions Bill, due to come into force in April 2005.

Moral hazard refers to the practice of employers deliberately manipulating their finances to shift pension deficits on to the Pension Protection Fund, the Government scheme set-up to compensate employees if their employer goes bust or the pension scheme is underfunded.

Employers and the pension industry argued the clause in its original form was too inflexible and too tough on businesses.

Under the amendments, individuals, including shareholders and company directors, will no longer by liable for any pension deficits.

Other changes include giving the Pensions Regulator more discretion over whether to impose contribution notices if a company's pension scheme could force the business to go bust and create unemployment.

Pensions Minister Malcolm Wicks said: 'With the moral hazard clauses in the Pensions Bill we have sent a strong message to unscrupulous employers: they can't use company structures and business transactions as a cover for avoiding pensions obligations and dumping their liabilities.'

He added: 'The amendments we have put forward to the Bill today will provide the reassurance responsible businesses have asked for on the aims, objectives and practical application of the moral hazard clauses.

'At the same time the amendments ensure the Pensions Protection Fund and the taxpayer don't pay for employers seeking to dodge their pension obligations.'